Maryland Shaping Up to Be the Next Big Medical Marijuana Market

Amid the noise and excitement surrounding high-profile emerging medical cannabis states such as Illinois, Nevada, New York and Massachusetts, another upcoming market with vast potential has drawn surprisingly little fanfare: Maryland.

The next East Coast state to join the ranks of formal MMJ markets, Maryland’s relatively inviting medical cannabis rules open the door to marijuana investors and existing companies looking to expand.

To be sure, the overall regulatory framework is strict and licensing fees are high. But Maryland has no residency requirements for those seeking ownership stakes in medical cannabis companies, unlike many other markets.

That will likely entice many outsiders to get involved.

“Maryland is kind of a green field for an East Coast state to be getting into the business right now,” said Lori Glauser, a Las Vegas-based marijuana consultant who’s been in talks with potential license applicants in Maryland.

Immense Opportunities

The level of business opportunities in general will be high.

Maryland will license up to 109 dispensaries – far more than any other recent MMJ state – along with 15 cultivators and an undetermined number of infused product manufacturers (the state’s Medical Cannabis Commission will set a number of processors at some point once it determines how many will be able to meet demand).

Although companies will be limited to a single license in each category, one business can hold as many as three licenses – one for cultivation, one for producing extracts and edibles, and one for dispensing. And the commission will probably be looking for companies able to streamline with vertical integration, said Washington DC-based attorney Steve Oster.

There will be “tremendous business opportunities” for license winners in Maryland, said Oster, who has clients that intend to apply for Maryland MMJ permits.

The application process may start as early as Sept. 15, the day after the state Medical Cannabis Commission promulgates its final draft rules, although the agency hasn’t decided precisely when it will release application forms.

Once provisional licenses are awarded, those businesses will have a calendar year to get up and running. The first dispensaries are expected to open in the second half of next year.

Interest From Afar, Close to Home

Many companies have been prepping for months for the application process.

Some industry insiders told Marijuana Business Daily that a number of national players in the cannabis space are eyeing Maryland, including license holders from California, Colorado, Illinois, Nevada, New York, Washington DC and Washington State. One source said a prominent company that operates a chain of recreational stores in Colorado is looking to apply, as is PharmaCann, which holds licenses in both New York and Illinois.

“I know of multiple people in New York and in other states (who are interested in Maryland). And these are big, serious people,” said PharmaCann CEO Teddy Scott. “The bar for Maryland is going to be very high.”

A number of companies that put serious resources into applying in states such as Illinois and New York but didn’t win licenses are going to be looking for their next opportunity, and the logical next choice is Maryland, Scott said.

Still, Maryland locals have an edge: longstanding ties to the state, including residency of both business owners and investors, can count for up to 15% of an applicant’s score.

“What we’re seeing here is people coming here from all over the country with a lot of money and some experience in other states, but they really don’t have a foothold in Maryland and don’t have the type of Maryland history that the commission should and will take into account,” Oster said. “There are many out-of-state applicants who have signed on a Maryland resident to either represent them as the applicant, or to enhance their application.”

That’s partially what Reon King-Burrus and her partner Brenda Jones have done. King-Burrus, who hails from St. Louis, and Jones, from Indiana, have two other business partners with their new startup, Herbal Innovations. One is a Maryland real estate developer who’s been doing business in the state since the 1980s.

“He also knows the needs of his community and the state, and basically has great insights where we may not,” King-Burrus said. “He’s also well-connected with the community politically.”

High Hurdles

Some, however, doubt that the state will even receive 94 quality applications for the dispensary permits, due to the high cost of licenses. Combine application fees with license fees, and the cost is $45,000 for dispensaries and $131,000 for cultivation sites.

There are other costs, too: finding real estate, paying for consultants and lawyers, and so on. King-Burrus, for example, said her team has about $1 million in assets ready to go. But she also has the backing of several investors, she said. That’s not going to be the case for every company interested in getting into the Maryland cannabis trade.

“The biggest hurdle is you’ve got to have money for the business,” said Carissa Cartalemi, a Maryland resident who’s started a company called Hallaway and has her eye on a dispensary license in the Baltimore area. “At this point, the capitalization need has really discouraged a lot of people that may have otherwise put their hats in the ring.”

Further hurdles for businesses include detailed business plans, security, transportation and tracking inventory.

Cartalemi, who also chairs a local chapter of Women Grow, estimated that the state will get around 50 cultivation applications and perhaps 75 dispensary applications.

Glauser, however, thinks there’s enough out-of-state interest in Maryland that the commission will receive “several hundred applications, if not many hundreds of applications,” including “established players in the West.”

Oster said a good number of winning applicants will likely be a combination of locals and out-of-state players.

“What I think you’ll find is strong credible Maryland-based applicants will be working with knowledgeable consultants, so they can not only trade on their Maryland status, but also address favorably any issues with respect to their ability to successfully run the business,” Oster said.

3 comments on “Maryland Shaping Up to Be the Next Big Medical Marijuana Market”

One of the most attractive aspects of Maryland is that it is poised to be the first major state on the East coast (NY notwithstanding) which allows a for profit ownership structure for MMJ organizations. It will be an exciting market to see unfold.

This piece does a nice job of describing the landscape of Maryland’s emerging industry, but it’s worth mentioning that infused foods (edibles) are currently not allowed under Maryland regulations. So processors can make concentrates, tinctures, and topicals, but unfortunately not medibles (yet).